Delphi Files For Bankruptcy

[desmo9]

Delphi, the largest U.S. auto supplier, files for bankruptcy

By DEE-ANN DURBIN
AP Auto Writer

DETROIT (AP) -- Delphi Corp., the largest U.S. auto supplier, filed for bankruptcy Saturday, sending shock waves through a U.S. auto industry already weakened by high labor costs and falling market share. Delphi's bankruptcy is one of the largest in U.S. history.

The company filed to reorganize its U.S. operations in U.S. Bankruptcy Court in New York, where hearings are scheduled to begin next week. Delphi's non-U.S. operations weren't included in the filing.

Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.

"We will make every effort to make this as quick as possible," Miller told The Associated Press on Saturday.

Miller, a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with Delphi's former parent, General Motors Corp., and its largest union, the United Auto Workers. Miller set a deadline of Oct. 17, when U.S. bankruptcy laws are scheduled to change.

Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs. Miller said the three parties agreed to continue their discussions after a bankruptcy filing.

"We mutually concluded there was still too much of the complex work yet to be done," Miller said. "It was not going to be efficient to work right up to the midnight deadline to the change in the law."

Miller said nothing will change immediately. Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule, he said. Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.

"We are not going to adversely affect our customers," he said. "Our people will get their pay checks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way."

Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group of lenders led by JPMorgan Chase Bank and Citigroup Global Markets Inc.

Delphi, based in the Detroit suburb of Troy, has struggled to make a profit since GM spun it off in 1999. It lost $4.8 billion in 2004 and nearly $750 million in the first half of this year.

Delphi had $16.5 billion in total assets as of June 30, the most recent figure available, and has total debt of $6 billion, Standard & Poor's said Thursday. The company had $4.3 billion in unfunded pension liabilities at the end of 2004, according to a company filing with the U.S. Securities and Exchange Commission.

The largest corporate bankruptcy in the U.S. was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.

GM still accounts for half of Delphi's business and bought $14 billion in parts from the supplier last year, including air bags, brakes, steering and climate control systems, satellite radio and on-board navigators. Ford Motor Co. was Delphi's second-largest customer in 2004, buying $1.2 billion in parts from Delphi. DaimlerChrysler AG and Toyota Motor Corp. also are customers.



continued:

http://hosted.ap.org/dynamic/stories...MPLATE=DEFAULT

[plane]

What will be the ultimate impact? Is Delphi only another in a long series of auto-supplier bankruptcies? Or is this a great chance to regain competitiveness, albeit at the cost of worker salaries and benefits? I think there are a lot more questions right now than answers.

[Recxjake]

This is good for GM. The UAW will wake up, and start being realistic. I read somwhere that if the Union workers just paid the same for healtcare as salaried employees this wouldn't even be a topic for GM. Is this true??

[Perian]

This chapter 11 filing by Delphi will change everything for GM.

I predict it will make it MUCH easier for GM to do the same one day in the near future.

**********************************************
I preface that statement by stating that too many things have to fall into place to prevent it.
**********************************************

Think about it.

GM needs:

Health Care relief.
Pension relief.
Decrease in the cost of purchased parts and materials.
Low inflation, interest rate driven economy.
A perfect GMT900 launch.
Decrease in gasoline costs.
A great UAW contract.
A few more Chevy HHR blockbusters.
Etc, Etc.

This chapter 11 filing by Delphi and its' possible outcome of broken union contracts, reduced health care and the abandonment of pension funds to the PGRB will rock the automotive industry.

[desmo9]

That's why I think GM hasn't been willing to bail out Delphi to prevent the bankruptcy. GM knows they've finally, at long last, got the union by the short hairs.

At the end of the day, this will be a very good thing for the U.S. auto industry.

[mbukukanyau]

UAW is the culprit here. Now, They are left defenseless... They refused to work with the company, wanted more and more and even more... Now they might not even have jobs...
Jobs will go to illegal’s.. You know what? Its kind of nice that UAW jobs go to illegal’s.. After all Unions funds the political party that thwarts efforts to revise and enforce immigration laws..
That party is also responsible for state and local government laws that prohibit local law enforcement from dealing with the problem...
Do not get me wrong, immigration is OK, i am an immigrant who worked hard and migrated legally..
But its a sham for me and others to go through all these legal hoops respect the law and all, while guys can just walk through the canyons and out as the like..
What’s the point of having borders then, and all these immigration legal hoops?

Anyways.. Good luck UAW.. Sell that Yukon.. You will need your savings.. Buy a Cavalier or something and go refinance your mortgage...
Tell your wife to stop shopping with that Providian master card too.. And pay it off now

You will need every penny..
Funny, UAW complained that if they went with Delphi’s proposal, they would not afford the products they make!
Who said you must afford the product you make? This is not Ford Model T!
Not all Duesenberg workers could afford the Duesenberg!

[1BadPig]

Actually, thank the UAW that most American's can't afford the car they make without mortgage their savings and future.

[desmo9]

Originally Posted by 1BadPig

Actually, thank the UAW that most American's can't afford the car they make without mortgage their savings and future.

Good point. The UAW propaganda machine says that UAW members won't be able to afford a brand new Cadillac anymore. But considering that UAW glottony adds $1500 to every car due to overly-rich healthcare, and another $2000 due to wages above market rate ... how many average Joes, non-UAW, have had to buy used cars or lesser cars in order to keep the UAW flush with cash?

[Infiniti Z350]

Here's GM's take on the matter:

GM Comments on Delphi Filing Under Chapter 11

http://media.gm.com/servlet/GatewayS...=2&docid=19342

[01cavalier]

I hope this works out to be a good thing, and help eliminate the burden that Delphi has with ridiculously high wages, benefits and the job bank. I wish most jobs gave the benefits they got. Other non-UAW GM suppliers dont get those benefits!

[goblue]

The goal is for GM not to enter bankrupcy - the average joe buying an american car doesn't even know who Delphi is, but put GM into Chapter 11 - and people start worrying about their warranties. It would be very problematic for GM for a few years. Best hope, this causes the UAW to break and accept huge concessions for Delphi and GM in 07 - or face the same wrath. Therefore, its important for GM to really hurt the UAW on this round, so just uttering the word Chapter 11 in 07 causes the UAW to accept the same for GM. The rank and file has to be convinced "you're next" - unless you accept what we offer without a strike. Its reverse blackmail really, the UAW forced GM into terrible packages over the last decade by threatening a strike - now GM is doing the same with Chapter 11.

[AJR]

So, Delphi finally did it. Well, now this makes things more interesting. We'll see if any changes do come about or if this continues the decline of the American auto industry.

[tgagneguam]

I admit I'm a bit uneducated about the precise nature of bankruptcy filings. Specifically, do the new bankruptcy rules going into effect this month make it more difficult to file for bankruptcy on both the personal and corporate levels or no? I ask because if it would be more difficult, then GM will need to get cracking if their intention is to file (I'm not convinced that that's GM's plan). I suspect that the new, allegedly tougher rules may explain the timing of Delphi's move.

[desmo9]

Originally Posted by Infiniti Z350

Here's GM's take on the matter:



On the other hand, GM estimates that it currently pays a purchase price premium to Delphi in the aggregate of approximately $2 billion a year above globally competitive market prices for systems, components and parts purchased from Delphi's North American operations. GM believes that a restructuring of Delphi through the Chapter 11 process provides GM with an opportunity to reduce or eliminate that purchase price premium, over time, as well as improve the quality of systems, components and parts it procures.

There's the rub. As long as GM remains one of Delphi's largest customers, Delphi will never be altogether profitable. As soon as the union's broke and Delphi reports a measly $10 million profit, GM will take it through pricing concessions for parts. That's been going on between domestic OEMs and the supply base for the last few years. As bad as GM's own finances look, they've been milking the suppliers dry.

So for the time being, as GM can't squeeze Delphi for more pricing concessions, and as sales volumes for the SUV cash cow whittle down, GM's gonna be in for a world of hurt. Thus, I agree with goblue, GM's using this as an opportunity to bust the UAW without putting itself at a risk for work stoppages. The union now realizes where their stinginess got 'em. Three months ago, they wouldn't even accept health care plans comparable to salaried workers'. Three months in the future, they'll be looking at a 50% wage cut, and an even less-generous healthcare package.

Gettelfinger's an idiot.

[desmo9]

Originally Posted by tgagneguam

I admit I'm a bit uneducated about the precise nature of bankruptcy filings. Specifically, do the new bankruptcy rules going into effect this month make it more difficult to file for bankruptcy on both the personal and corporate levels or no? I ask because if it would be more difficult, then GM will need to get cracking if their intention is to file (I'm not convinced that that's GM's plan). I suspect that the new, allegedly tougher rules may explain the timing of Delphi's move.

Just this morning I read a detailed summary of the changes in corporate bankruptcy law come 10/17. It's mainly a drop in executive compensation during bankruptcy, and a more limited amount of time a company has to bring a restructuring proposal to the courts (which must include a potential plan for liquidation).

I'm not sure GM could file now if it wanted to, because despite $200 billion of debt, they have about $30 billion in the bank. Furthermore, bankruptcy of a retail OEM would decimate its market share. GM would stand to drop from 27% to 20% almost instantly. People aren't eager to spend $30K on a car if they believe the company won't be around to honor warranties or offer service. Chapter 11 is not bankruptcy, it's a restructuring ... bankruptcy *protection*. But people hear the 'B' word, and that's all it takes.

I suspect the union will be a little more generous to GM in 2007 after this. I'm convinced that's why GM didn't bail out Delphi to prevent today's filing.